Beige Book

For use at 2:00 PM EST

Wednesday

April 19, 2023

The Beige Book

Summary of Commentary on Current Economic Conditions

By Federal Reserve District

April 2023

Federal Reserve Districts

Minneapolis

Boston

New York

Chicago

Cleveland

Philadelphia

San Francisco

Kansas City

Dallas

Alaska and Hawaii

are part of the

San Francisco District.

St. Louis

Richmond

Atlanta

The System serves commonwealths and territories as follows: the New York Bank serves the

Commonwealth of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank serves

American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.

This report was prepared at the Federal Reserve Bank of Richmond based on information collected

on or before April 10, 2023. This document summarizes comments received from contacts outside

the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

National Summary

Boston

1

A-1

The Beige Book is a Federal Reserve System publication about current

economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety

of mostly qualitative information, gathered directly from each District’s

sources. Reports are published eight times per year.

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What is the purpose of the Beige Book?

First District

New York

Second District

Philadelphia

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Third District

Cleveland

D-1

Fourth District

Richmond

E-1

Fifth District

Atlanta

F-1

Sixth District

Chicago

G-1

Seventh District

St. Louis

H-1

Eighth District

Minneapolis

I-1

Ninth District

Kansas City

J-1

Tenth District

Dallas

K-1

Eleventh District

San Francisco

Twelfth District

What is the Beige Book?

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The Beige Book is intended to characterize the change in economic

conditions since the last report. Outreach for the Beige Book is one of

many ways the Federal Reserve System engages with businesses and

other organizations about economic developments in their communities. Because this information is collected from a wide range of contacts through a variety of formal and informal methods, the Beige Book

can complement other forms of regional information gathering. The

Beige Book is not a commentary on the views of Federal Reserve

officials.

How is the information collected?

Each Federal Reserve Bank gathers information on current economic

conditions in its District through reports from Bank and Branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts, and other

sources. Contacts are not selected at random; rather, Banks strive to

curate a diverse set of sources that can provide accurate and objective

information about a broad range of economic activities. The Beige

Book serves as a regular summary of this information for the public.

How is the information used?

The information from contacts supplements the data and analysis used

by Federal Reserve economists and staff to assess economic conditions in the Federal Reserve Districts. The qualitative nature of the

Beige Book creates an opportunity to characterize dynamics and identify emerging trends in the economy that may not be readily apparent in

the available economic data. This information enables comparison of

economic conditions in different parts of the country, which can be

helpful for assessing the outlook for the national economy.

The Beige Book does not have the type of information I’m looking

for. What other information is available?

The Federal Reserve System conducts a wide array of recurring surveys of businesses, households, and community organizations. A list of

statistical releases compiled by the Federal Reserve Board is available

here, links to each of the Federal Reserve Banks are available here,

and a summary of the System’s community outreach is available here.

In addition, Fed Listens events have been held around the country to

hear about how monetary policy affects peoples’ daily lives and livelihoods. The System also relies on a variety of advisory councils—

whose members are drawn from a wide array of businesses, non-profit

organizations, and community groups—to hear diverse perspectives on

the economy in carrying out its responsibilities.

National Summary

The Beige Book ■ April 2023

Overall Economic Activity

Overall economic activity was little changed in recent weeks. Nine Districts reported either no change or only a slight

change in activity this period while three indicated modest growth. Expectations for future growth were mostly unchanged as well; however, two Districts saw outlooks deteriorate. Consumer spending was generally seen as flat to

down slightly amid continued reports of moderate price growth. Auto sales remained steady overall, with only a couple

of Districts reporting improved sales and inventory levels. Travel and tourism picked up across much of the country this

period. Manufacturing activity was widely reported as flat or down even as supply chains continued to improve. Transportation and freight volumes were also flat to down, according to several Districts. On balance, residential real estate

sales and new construction activity softened modestly. Nonresidential construction was little changed while sales and

leasing activity was generally flat to down. Lending volumes and loan demand generally declined across consumer and

business loan types. Several Districts noted that banks tightened lending standards amid increased uncertainty and

concerns about liquidity. The majority of Districts reported steady to increasing demand and sales for nonfinancial services. Agriculture conditions were mostly unchanged in recent weeks while some softening was reported in energy

markets.

Labor Markets

Employment growth moderated somewhat this period as several Districts reported a slower pace of growth than in recent Beige Book reports. A small number of firms reported mass layoffs, and those were centered at a subset of the

largest companies. Some other firms opted to allow for natural attrition to occur, and to hire only for critically important

roles. Contacts reported the labor market becoming less tight as several Districts noted increases to the labor supply.

Additionally, firms benefited from better employee retention, which allowed them to hire for open roles while not constantly trying to back-fill positions. Wages have shown some moderation but remain elevated. Several Districts reported

declining needs for off-cycle wage increases compared to last year.

Prices

Overall price levels rose moderately during this reporting period, though the rate of price increases appeared to be

slowing. Contacts noted modest-to-sharp declines in the prices of nonlabor inputs and significantly lower freight costs

in recent weeks. Nevertheless, producer prices for finished goods rose modestly this period, albeit at a slightly slower

pace. Selling price pressures eased broadly in manufacturing and services sectors. Consumer prices generally increased due to still-elevated demand as well as higher inventory and labor costs. Prices for homes and rents leveled

out in most Districts but remained at near record highs. Contacts expected further relief from input cost pressures but

anticipated changing their prices more frequently compared to previous years.

Highlights by Federal Reserve District

Boston

New York

Business activity was roughly even. Tourism contacts

enjoyed moderate growth, while retail sales were flat,

and manufacturing slowed. Home sales fell further.

Headcounts rose modestly and wage growth was moderate. Prices increased modestly amid further easing of

cost pressures. Some contacts worried that smaller

banks might restrict lending over liquidity concerns,

putting a damper on economic activity.

Regional economic activity was little changed, though

goods production picked up noticeably. The labor market

has remained solid, with ongoing slight job growth and

wage gains. Inflationary pressures moderated somewhat

but remained widespread. Conditions in the broad finance sector deteriorated sharply coinciding with recent

stress in the banking sector.

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National Summary

Philadelphia

St. Louis

Business activity appeared to decline slightly during the

current Beige Book period after increasing last period.

Consumer demand ticked down, while employment held

steady. Wage growth slowed to a modest pace. Price

inflation subsided but continued to grow modestly. Banks

reported tighter lending standards. Expectations were

subdued as sentiment remained cautious.

Economic conditions have remained unchanged since

our previous report. Labor markets remained tight, but

reports of easing increased. Firms struggled to pass on

price increase to customers, and contacts across a

range of industries reported supply chain improvements.

Banking contacts reported slowing loan growth and a

decline in deposits, but expressed confidence in their

overall position.

Cleveland

Minneapolis

Economic activity was generally flat in the Fourth District

and developments in the banking sector appeared to

have very little impact on either recent economic activity

or credit availability. Labor demand eased, and the supply of workers increased, particularly for lower-wage

positions. Wage and other cost pressures continued to

ease.

Economic activity in the region grew slightly in recent

weeks. Employment gains were modest, and labor supply improved slightly. Prices were steady and wages

rose slightly; levels for both remained high. Consumer

spending was flat. Manufacturing declined a bit, but the

outlook was more positive. Construction activity improved slightly, save for residential building. Minority-and

women-owned firms reported steady activity.

Richmond

The regional economy contracted slightly in recent

weeks. Manufacturing activity, retail spending, and loan

demand softened. Travel and tourism picked up moderately while nonfinancial service providers indicated

steady demand. Real estate firms reported reduced

activity, while transportation freight volumes contracted

moderately. Employment rose slightly with moderate

increase in wages. Prices grew at a strong rate.

Kansas City

Total economic activity across the Tenth District declined

slightly in March and April. However, almost every business contact reported no pull back in planned capital

expenditures, hiring plans or planned wage increases in

response to recent financial volatility. Worker retention

was reportedly much higher, even as wage growth

slowed. Households pulled back on spending, particularly on bigger ticket items like cars or home construction

projects.

Atlanta

Economic activity grew modestly. Labor markets improved further, and wage pressures eased slightly.

Some nonlabor costs moderated and others remained

unstable. Retail sales softened. Auto sales were robust.

Tourism activity remained strong. Housing demand

improved further. Transportation was mixed. Loan

growth was solid. Energy demand was healthy. Agriculture remained mixed.

Dallas

Modest growth continued, with steady gains in service

sector activity and a pickup in home sales and manufacturing output. Job growth was modest, though hiring

slowed sharply in services. The pace of price increases

slowed. Outlooks were largely negative, and contacts

voiced concern about weakening demand, a potential

recession, and the spillover effects of the recent bank

failures on the broader economy.

Chicago

Economic activity was little changed. Employment increased moderately; consumer spending, business

spending, and construction and real estate were flat;

nonbusiness contacts saw little change in activity; and

manufacturing demand decreased modestly. Prices and

wages rose moderately, and financial conditions tightened moderately. Agricultural incomes were expected to

be lower in 2023 than in 2022.

San Francisco

Economic activity expanded slightly. Employment levels

were steady amid tight labor market conditions, while

wage and price growth moderated further. Demand for

retail goods softened, while demand for services was

robust. Manufacturing activity was stable, while conditions in the agriculture sector slowed somewhat. Residential and commercial real estate activity fell, and lending activity declined substantially.

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Federal Reserve Bank of

Boston

The Beige Book ■ April 2023

Summary of Economic Activity

Business activity in the First District was flat on average. Tourism maintained its strong momentum, with moderate

further increases in air travel and convention activity, while retail sales were steady on balance amid mixed results.

Demand softened moderately for manufacturers, although some continued to experience solid revenue growth. Software and IT services firms reported stable demand and somewhat higher profits. Residential real estate sales declined

modestly, as low inventories and high prices continued to deter transactions. Commercial real estate activity was flat,

but credit was expected to tighten moving forward. Employment increased modestly and wage growth was moderate.

Prices increased at a modest pace and slower price growth was expected for the rest of 2023. The outlook was mostly

positive, but some contacts worried that smaller banks might restrict lending over liquidity concerns, putting a damper on

economic activity.

modest price hikes for selected products in addition to

annual cost-of-living adjustments built into contracts.

Price changes were mixed among manufacturers, including moderate increases by some and more aggressive

promotions and discounts by others. Retail prices were

largely stable. Hotel room rates in the Greater Boston

area declined in line with seasonal expectations but have

increased 10 percent relative to the same time last year.

Cost pressures abated noticeably, as contacts noted

modest-to-sharp declines in the prices of raw materials

and significantly lower freight costs. On balance, the

outlook called for further easing of price growth for the

remainder of 2023, and some contacts planned to hold

prices strictly fixed moving forward on worries that additional markups would be counterproductive.

Labor Markets

Headcounts increased modestly on balance, led by

strong labor demand in the First District’s hospitality and

tourism sectors, and wage growth was steady at a moderate pace. Contacts in manufacturing said that the labor

market softened significantly, making for much easier

hiring and helping to alleviate wage pressures some.

employment was roughly flat, and its wage growth was

moderate, as contacts said that turnover was stable at a

manageable pace, marking an improvement from one

year earlier. A clothing retailer was engaged in hiring

additional warehouse workers, but the pace of filling the

200 openings was slower than anticipated. Robust convention activity and an anticipated increase in business

travel from Asia gave a moderate boost to food and

beverage staffing at Boston-area hotels. Cape Cod

hospitality contacts ramped up efforts to recruit international workers to address labor shortages in advance of

the busy summer season, and Massachusetts has funded an effort to place visa holders in temporary housing to

facilitate such hiring. Looking ahead, labor demand is

expected to soften modestly on balance, but only one

firm—a manufacturer—was planning to make significant

reductions in staff in the near future. Wage growth was

predicted to slow to a modest average pace.

Retail and Tourism

First District retail contacts reported flat sales on average, while tourism contacts saw moderate further increases in activity relative to seasonal trends. A clothing

retailer experienced softer demand throughout the early

months of 2023, but revenues held steady due to earlier

price increases. Cape Cod retailers experienced strong

first quarter sales, but a large-scale infrastructure project

crimped activity in recent weeks. Based on advance

bookings, hospitality contacts on the Cape expect summer 2023 occupancy and room rates to match last summer’s record-setting results. Airline passenger traffic

through Boston increased steadily in recent months, on

Prices

Price increases were modest on average as cost pressures eased further. Prices were mostly flat among

software and IT services firms, although one enacted

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Federal Reserve Bank of Boston

both domestic and international routes, reaching roughly

95 percent of pre-pandemic levels as of the first quarter

of 2023. The Greater Boston hotel occupancy rate increased relative to seasonal trends, and spring and

summer bookings continued to climb. Scheduled convention activity and cruise bookings for the spring and

summer are expected to exceed 2019 levels.

balance received) increasingly generous concessions.

Conditions in the retail market worsened slightly in response to patches of weakness in consumer spending,

and as a result firms became more cautious with capital

spending. Concerning the outlook, contacts expected to

see slight to moderate further declines in office and retail

leasing activity moving forward, and perceived growing

constraints on investment activity. In particular, several

contacts predicted that lending to the commercial real

estate sector would become more conservative in response to heightened concerns about banking risks, and

one expressed that the credit contraction could be large

enough to spill over to other sectors of the economy.

Manufacturing and Related Services

Manufacturing contacts reported mixed revenue results,

but demand was moderately softer on balance. Some

contacts reported modestly higher sales but also said

that the pace of revenue growth had slowed recently. For

one firm, overall results were hit by a steep slowdown in

demand from customers in the semiconductor industry.

Others experienced weaker sales as their customers

continued to draw on inventories accumulated in 2022 in

response to supply chain concerns. A contact in the

semiconductor industry said that industry sales were

down but that their own sales were up due to investment

demand from electric car manufacturers. None of our

contacts reported major revisions to capital expenditure

plans, and a few pointed to increased spending on automation. Contacts were generally optimistic for their own

results for the rest of 2023, although several described

the outlook for the economy more broadly as highly

uncertain.

Residential Real Estate

First District home sales softened in February (the latest

month for which data were available) following a temporary uptick in sales in January that was attributed to a

slight—yet partly transient—decline in mortgage rates.

Closed single-family sales were down sharply on a yearover-year basis, and in Boston dipped to their lowest

level in over a decade. Condo sales were roughly flat

since the previous report. Inventories grew over-the-year

on balance, albeit at a somewhat slower pace than was

reported last time, and several contacts noted that the

supply of homes for sale remained extremely limited.

Home prices showed signs of softening amid growing

buyer frustration over the lack of home affordability.

Median single-family home prices nonetheless posted

modest year-over-year increases on balance, a fact that

one contact attributed to a decline in the proportion of

starter homes on the market, although the median home

price in Boston was down moderately from a year earlier.

Looking ahead, contacts expressed concerns that low

inventories and high mortgage rates could dampen

activity during the typically busy spring sales season.■

Software and IT Services

Demand for software and IT services was stable on

balance. Revenue growth at one firm exceeded expectations, and another experienced an ongoing pullback by

clients facing internal liquidity concerns. Profits and

margins were modestly higher on average. Capital and

technology spending was unchanged and was expected

to hold steady for most firms, although one mentioned

the possibility that capital expenditures could soften

moving forward. Contacts were largely optimistic and

expected demand for their own products and services to

hold steady moving forward. Although one contact perceived that the risk of a widespread banking crisis had

abated recently, another contact felt that nervousness

about the banking sector could dampen aggregate economic activity.

Commercial Real Estate

Commercial real estate activity in the First District was

mostly unchanged since February. In the industrial property market, rents continued to level off even though

leasing demand was still deemed strong relative to supply. Office leasing activity was mostly flat, although contacts noted a modest slowing of deal flow in both Boston

and Providence. Office asking rents were roughly stable,

but one contact noted that tenants demanded (and on

For more information about District economic conditions visit:

www.bostonfed.org/regional‐economy

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Federal Reserve Bank of

New York

The Beige Book ■ April 2023

Summary of Economic Activity

Economic activity in the Second District was little changed in the latest reporting period. The labor market has remained

solid: employment increased slightly despite ongoing difficulty finding workers, wages continued to increase, and many

businesses plan to add staff in the months ahead. Inflationary pressures eased somewhat but remained widespread.

Supply availability, while still constrained, continued to improve, and goods production picked up noticeably. Consumer

spending was flat to up slightly in recent weeks, while tourism has continued to strengthen. The home sales market has

continued to pick up and the rental market has been steady. On balance, commercial real estate markets were mostly

unchanged. Conditions in the broad finance sector deteriorated sharply, coinciding with recent stress in the banking

sector. Regional banks continued to report widespread declines in loan demand, ongoing credit tightening, and modestly rising mortgage delinquency rates. Amid heightened uncertainty, most businesses do not expect economic conditions

to improve in the coming months.

Labor Markets

Prices

Labor market conditions have remained solid. On balance, employment increased slightly in the latest reporting period despite ongoing difficulty finding workers

across the region. However, businesses in the manufacturing, construction, and education & health sectors

indicated that employment declined in recent weeks.

Even so, contacts at two major employment agencies

noted ongoing strong labor demand and continued to

indicate that worries of widespread weakening in the

labor market have not materialized. Indeed, thus far,

layoffs have been concentrated in large companies, and

mostly among their workers who are outside of the region. Further, a New York City employment agency indicated that the broader local labor market has yet to experience noticeable ripple effects from recent stress in the

banking sector. Looking ahead, on net, businesses plan

to add staff in the coming months.

Inflationary pressures moderated somewhat but remained widespread. Businesses reported that the pace

of input price increases slowed slightly in recent weeks.

Still, the costs of transportation, energy, and many raw

materials remained high. The pace of selling price increases also eased somewhat, especially in the service

sector though not among retailers or leisure & hospitality

firms. Fewer businesses than in the last report expect

prices to increase.

Consumer Spending

Consumer spending was flat to up slightly in recent

weeks as consumers continued to face pressure from

high inflation and heightened uncertainty. Nonauto retailers indicated that business was sluggish and down

slightly in recent weeks, while spending on travel-related

services, recreation, and in restaurants and bars has

remained strong. Auto dealers in upstate New York

reported that sales of new vehicles were steady with

ongoing improvements in inventory levels, while sales of

used vehicles firmed. Consumer confidence in the region

rose to a nearly two-year high in March, driven by growing optimism among New York City residents.

Wages continued to increase, though at a somewhat

slower pace than earlier in the year as major compensation adjustments tend to be concentrated at the beginning

of the year for most workers. Businesses expect wage

increases to continue to moderate.

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Federal Reserve Bank of New York

Residential rental markets have been steady. After peaking last summer, rents including concessions have been

little changed near record highs in Manhattan, Brooklyn,

and Queens and rental vacancy rates have remained

exceptionally low as people gradually continue to return to

New York City. Rents have also plateaued at a high level

in much of upstate New York.

Manufacturing and Distribution

Manufacturing activity picked up in recent weeks, following several months of contraction. New orders and shipments surged, and businesses indicated that supply

availability, while still constrained, continued to improve.

However, businesses in wholesale distribution and transportation & warehousing reported declining activity.

While manufacturers remain mildly optimistic, distribution

-related businesses have turned pessimistic.

Commercial real estate markets were little changed in

recent weeks. Office vacancy rates edged up slightly in

and around New York City and were steady across upstate

New York, while office rents were mostly flat across the

District. New York City’s retail market weakened somewhat, with vacancy rates up slightly and rents trending

down. Vacancy rates remained at low levels in the industrial market and rents trended up modestly.

Services

On balance, service sector activity rose modestly,

though conditions varied across sectors. Personal services businesses reported moderate weakening, while

providers of business & professional, education & health,

and leisure & hospitality services noted some growth in

activity after a sustained period of weakness. Businesses in the service sector generally expect little change in

economic conditions in the months ahead.

Overall, construction contacts reported weakening conditions in March and early April. Office construction remained steady at a low level in most of the District, though

there were some new starts in northern New Jersey, Long

Island, and upstate New York. Industrial construction was

solid, but little changed across the District. Multi-family

residential starts picked up from low levels in Manhattan

and parts of upstate New York but remained weak elsewhere.

Tourism activity in New York City continued to strengthen and is nearing pre-pandemic levels. While domestic

travel remains strong, international travel continues to

lag. Visitors from Asia—especially China—remain noticeably absent, in part due to long wait times for visas.

Though business travel has yet to fully bounce back, it

has picked up beyond expectations in recent weeks.

Demand for hotel rooms continued to increase with

advance bookings trending up as people have grown

more comfortable traveling. Even with the steady uptick

in visitors to New York City, the reduction in daily commuters continues to exert pressure on the City’s retailers

and entertainment-related businesses.

Banking and Finance

Conditions in the broad finance sector deteriorated sharply

coinciding with recent stress in the banking sector. Small

to medium-sized banks in the District reported widespread

declines in loan demand across all loan segments. Credit

standards tightened noticeably for all loan types, and loan

spreads continued to narrow. Deposit rates moved higher.

Finally, delinquency rates edged up on residential and

commercial mortgages.

Real Estate and Construction

Residential sales have picked up with the start of the

spring selling season, with prices steady at a high level.

Sales activity in and around New York City has continued to increase beyond the seasonal norm. By contrast,

real estate contacts in upstate New York indicated that

the spring selling season has gotten off to a slower start

in part due to unseasonably harsh weather, though

demand remains strong for homes in the middle of the

region’s price range. While listings have increased, the

inventory of available homes has remained exceptionally

low across the region except in Manhattan. Contacts

pointed to heightened uncertainty and the prevalence of

homeowners with mortgages locked in at historically low

rates as key factors keeping some people from listing

their homes and moving.

Community Perspectives

Community leaders noted that economic challenges for

lower-income families have been increasing as pandemicera assistance programs wind down. With the temporary

boost in SNAP benefits and Medicaid supplementation

being phased out, community organizations are stepping

up their efforts to support the increase in vulnerable families facing difficulty affording food and healthcare. Contacts

expressed concern that state and local budgetary pressures may impede the provision of community services.

Labor shortages and understaffing in the not-for-profit

sector have just begun to ease, with increases in the number and quality of applicants. ■

For more information about District economic conditions visit:

https://www.newyorkfed.org/regional-economy

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Federal Reserve Bank of

Philadelphia

The Beige Book ■ April 2023

Summary of Economic Activity

On balance, business activity in the Third District appears to have declined slightly after a small increase last period.

Consumer demand appeared to tick down, as contacts detailed slower traffic and smaller purchases by customers.

Inflation and higher interest rates continued to weigh on demand for big-ticket items, including homes and autos. Employment held steady as the demand for labor cooled. Wage growth eased to a modest pace, and inflation continued to

subside but remained moderate. Overall, firms continued to report less difficulty in hiring and fewer supply chain disruptions. Bank lending to businesses declined, as contacts within the banking industry reported a tightening of lending

standards. On balance, expectations for economic growth over the next six months remained subdued, as both manufacturing and nonmanufacturing firms continued to expect slight growth.

Labor Markets

lower compensation levels was just under 5 percent.

Contacts noted warehouses have started to cut hours

and jobs, which has led to lower wage pressure for other

businesses in the area.

Employment held steady following a modest rise in the

prior period. Contacts reported instituting hiring freezes,

cutting overtime, and conducting layoffs. Other firms

communicated they were not filling positions left open by

employee departures. Multiple contacts, including staffing firms, noted that hiring continued to be easier, with

more applicants, lower turnover, and less wage pressure. In our monthly surveys, employment growth appeared to be negligible, with most firms reporting no

change in employment levels in March. The index for

employment in the manufacturing sector turned negative

and fell to its lowest level since May 2020.

Prices

On balance, firms reported that prices continued to rise

moderately; however, they noted that the rate of price

increases appears to be slowing. In our monthly surveys,

the prices paid and prices received indexes declined for

both manufacturing and nonmanufacturing firms in

March and are below nonrecessionary historical averages, except for the index of nonmanufacturers’ input prices. On balance, contacts also noted fewer supply chain

disruptions.

However, firms still described staffing as one of their

primary challenges. Contacts continued to report difficulty staffing night and weekend shifts. Firms revealed the

need to frequently move workers along the production

line or overstaff shifts to accommodate the ongoing high

number of employees calling out.

Two-fifths of the manufacturing contacts expected to pay

higher prices over the next six months, while slightly less

than one-quarter expected to receive higher prices for

their own goods.

Manufacturing

Firms reported that wage inflation has continued to

subside since the prior month and grew at only a modest

pace – down from a moderate rise in each of the eight

prior periods. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit

costs per employee dropped to 30 percent – its lowest

level since March 2021; the share of firms reporting

Manufacturing activity declined moderately – after declining modestly in the prior period. The index for new orders fell from last period and was negative for the 10th

consecutive month. Moreover, the shipments index

dropped sharply and turned negative. Contacts confirmed that demand continued to slow and backlogs

C-1

Federal Reserve Bank of Philadelphia

continued to fall.

Credit card volumes were essentially flat after rising

moderately during the same period last year – a sign of a

potential pullback by consumers.

Despite the decline in manufacturing activity from the

prior period, nearly half of the firms estimated increased

total production growth for the first quarter of 2023 compared with the fourth quarter of 2022. Most firms reported labor supply and supply chains as slight or moderate

constraints to capacity utilization.

Banks reported a strong decline in commercial and

industrial loan volumes. Most contacts within the banking

industry confirmed a tightening of lending standards or

that discussions were ongoing regarding a change in

lending behavior, following the failures of Signature Bank

and Silicon Valley Bank. Furthermore, multiple contacts

noted they focused on lending to existing customers and

became more prudent in lending to new customers.

Expectations among manufacturers for growth in the

next six months remained subdued. The index for future

activity turned negative, and the future indexes for new

orders, shipments, and employment were little changed.

The index for future capital expenditures turned negative

for the first time since 2009.

Real Estate and Construction

Homebuilders reported steady sales following an unexpected uptick in the prior period. Contacts continued to

attribute the recent improvement to incentives, discounts

on older inventory, and new homes built with smaller

footprints and lower-cost features.

Consumer Spending

On balance, retailers (nonauto) and restaurateurs reported a slight decline in sales in the current period – after

those grew slightly in the prior period. Contacts reported

sales grew on a year-over-year basis because of higher

prices but described a slowdown in customer traffic and

fewer items purchased per visit. One contact also noted

the expiration of supplemental SNAP benefits was a

drag on sales in March.

Existing home sales fell slightly from already low levels

in most markets – following a moderate decline in the

prior period. Contacts noted that the lack of new listings

and the continued decline in housing affordability meant

the normally busy spring housing market may fail to

materialize.

Tourism contacts reported an uptick in activity,

particularly in urban areas, after reporting steady activity

in the prior period. Auto dealers again reported a slight

increase in sales as manufacturers continued to deliver

more new cars. However, contacts noted some softening

of demand because of higher financing costs. The increased inventory and softer demand has prompted

some dealers to lower prices and reintroduce incentives.

Requests for assistance with housing and utility bills fell

but continued to dominate the share of 211 requests in

New Jersey and Pennsylvania. Almost 32 percent of all

requests in the two states were related to housing, while

27 percent of the requests regarded utility bills.

Market participants in commercial real estate continued

to report steady current construction activity but noted

that more projects in the pipeline have been delayed or

canceled. Leasing activity continued to slow modestly.

Rent growth in multifamily housing eased slightly, and

landlords started to offer leasing incentives in some

markets. Demand for life sciences space remained

strong, but demand for warehouse space softened. ■

Nonfinancial Services

On balance, nonmanufacturing activity appeared to

decline slightly after growing slightly last period. The

index for general activity at the firm level fell to a nearzero reading, and the new orders index turned negative

as the share of firms reporting decreases exceeded the

share reporting increases. The index for sales also declined from the prior period but remained positive.

Financial Services

The volume of bank lending (excluding credit cards)

grew moderately during the period (not seasonally adjusted) – faster than the prior period but comparable with

growth in the same period last year. Inflationary effects

on big-ticket items continued to boost loan volume

growth during the current year relative to past years.

During the period, District banks reported moderate

growth in home mortgages and modest growth in auto

loans, other consumer lending, and commercial real

estate lending. Home equity lines declined modestly.

For more information about District economic conditions visit:

www.philadelphiafed.org/regional-economy

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Federal Reserve Bank of

Cleveland

The Beige Book ■ April 2023

Summary of Economic Activity

Reports from Fourth District business contacts were consistent with generally flat aggregate economic activity, though

conditions continued to vary by industry segment. While consumer spending appeared to firm somewhat from that of the

prior period, it remained soft, and business spending was mostly flat. Concerns about developments in the banking

industry reportedly had limited impact on recent business activity, though a small share of contacts reported a modest

decrease in credit availability. However, many contacts indicated that these developments had increased uncertainty.

Hiring slowed as firms’ demand for additional workers eased and as a larger share of contacts sought to reduce headcount. Labor availability appeared to increase, particularly for those seeking to fill lower-wage positions. Wage and other

nonlabor input cost pressures continued to trend lower, while price pressures eased from those of the previous reporting

period.

success yet.” That said, contacts in construction and

manufacturing noted that costs for steel and concrete

products increased recently. One steel producer said

that he expected steel costs to rise further in the second

quarter, but he expected costs to fall in the third quarter.

More broadly, contacts expected further relief from input

cost pressures in the months ahead.

Labor Markets

Employment growth in the Fourth District appeared to

be flat in recent weeks. The apparent easing in labor

demand was illustrated in more-frequent reports of

employers reducing staffing through attrition, hiring

freezes, or layoffs. Moreover, some banking and manufacturing firms noted replacing only revenue-generating

positions or hard-to-fill production positions while holding off on hiring support staff. Firms looking to increase

staff more frequently stated that labor supply had improved recently. On balance, firms planned to maintain

current staffing levels or selectively fill critical positions

in the coming weeks.

Overall selling-price pressures eased from those of the

prior reporting period, but they varied across industries.

On the one hand, natural gas prices fell amid mild winter

and early spring weather, and freight prices decreased

because of a drop in demand. On the other hand, some

manufacturers said they continued to raise prices to

“catch up” from the cost increases over the prior two

years. Similarly, some retail contacts reported selectively

raising prices to cover higher costs, though they did so

cautiously to remain competitive.

The softer demand for labor and the increased labor

supply were accompanied by further easing in wage

pressures. The share of contacts that reported increased pay fell to 36 percent, the lowest share in more

than two years. Moreover, 62 percent of contacts reported holding wages steady, many in response to declining

margins or increased labor availability. Even so, many

contacts across industries indicated that wage increases

remained necessary to attract and retain skilled labor.

Consumer Spending

Reports suggest that consumer spending firmed somewhat from that of the previous reporting period. Still,

demand for discretionary items remained soft as households faced continued pressure from inflation and increased interest rates. One general merchandiser noted

that higher prices for food and other essentials continued

“eating up more of the customer’s wallet,” leading customers to favor lower-priced options such as generic

brands. Auto sales dipped in part because increasing

interest rates and higher vehicle prices pushed out of the

Prices

Nonlabor input cost pressures eased in recent weeks,

continuing a trend that started last summer. Several

contacts reported that their overall costs had flattened.

One homebuilder said he recently started “pressing

people to lower [their] prices but haven't had much

D-1

Federal Reserve Bank of Cleveland

market many buyers who want, rather than need, a new

vehicle. One dealer hoped that more manufacturer incentives would increase demand, but he cautioned that

higher credit standards had become an additional headwind for potential buyers. On balance, contacts expected

consumer spending to remain stable in the coming

months.

among banks and to outflows to higher-yielding alternatives. Looking forward, loan demand was expected to

soften further in coming months.

Nonfinancial Services

Freight activity declined this reporting period. One hauler

mentioned that contract customers have cut back their

orders and that the spot market for freight has also

weakened. Contacts anticipated that freight demand

would continue to decline. Generally, professional and

business services contacts expected demand to be flat.

Manufacturing

Overall demand for manufactured goods increased

slightly from that in the previous period. Orders for aerospace-related products remained strong, but demand

generally weakened for items from manufacturers tied to

the housing and automotive sectors. Some manufacturers benefitted from an increase in international orders,

particularly from Europe, Asia, and the Middle East. That

said, heightened uncertainty tempered some manufacturers’ expectations because of a decrease in new orders and backlogs.

Community Conditions

Nonprofit contacts reported increased demand for their

services over the past six months because of rising costs

for food, shelter, and utilities. One contact noted that

food pantry use is up 30 percent compared to prepandemic levels, and another mentioned an increase in

the number of first-time users of food assistance. Several contacts said that homelessness was rising and that

more families were moving in with relatives because of

higher rents, increased evictions, and a shortage of

affordable housing. According to multiple contacts, fewer

landlords were accepting Section 8 vouchers, a situation

which contributed to the housing shortage. Some contacts who offer loan products to households and businesses noted that rising interest rates increased the

demand for their products. One community service provider saw a rise in applications for zero-interest, smalldollar loans, and a community development financial

institution contact reported that more individuals were

seeking funding through her enterprise because of higher interest rates at local banks. ■

Real Estate and Construction

Demand for residential construction and real estate

continued to be hindered by higher interest rates. One

homebuilder stated, “As long as interest rates stay high,

demand is going to be down. We’re still selling, but it’s

down from where it was a year ago.” Given low inventories, some builders reported that demand for housing

seems stronger than expected. Some builders are attempting to offset higher interest rates through various

incentives, including rate buydowns.

Nonresidential construction and real estate contacts

indicated that demand had changed little in recent weeks

on balance. While a few contacts reported that projects

had been put on hold, others indicated they have still

been able to secure new projects. One general contractor noted that demand had remained stable, but projects

were taking longer to get started because the firm had

been spending more time working on budgeting issues in

the preconstruction phase. Several contacts anticipated

construction and leasing activity to soften further in coming weeks because of rising interest rates and banks’

tightening credit.

Financial Services

Overall, loan demand continued to decrease, albeit at a

slower pace than in the prior period. Several bankers

reported that recent developments in the sector added to

heightened economic uncertainty that motivated customers to reach out about the safety of their deposits. Others

posited that the increased uncertainty along with high

interest rates had reduced borrowing. Lenders indicated

that delinquency rates remained low for both commercial

and consumer loans. Core deposits continued to decline,

a situation which bankers attributed to rate competition

For more information about District economic conditions visit:

www.clevelandfed.org/en/region/regional‐analysis

D-2

Federal Reserve Bank of

Richmond

The Beige Book ■ April 2023

Summary of Economic Activity

The Fifth District economy contracted slightly since our previous report. Manufacturing activity softened as new orders

fell and more customers started pushing back on price increases. District ports and trucking companies reported declines in freight volumes, particularly a sharp decline in import volumes, leading to lower shipping and trucking spot

rates. Consumer spending on retail goods and autos slowed slightly; however, spending on tourism and travel increased

moderately. Residential real estate markets softened as closings and pending sales declined while listing prices held

flat. Commercial real estate activity declined, on balance. The retail and industrial real estate segments remained

strong; however, the remaining segments, particularly office, softened. Financial institutions continued to report modest

declines in loan demand. Deposit levels also declined, on balance, despite some institutions reporting an inflow of deposits from new clients. Demand for nonfinancial services was unchanged in recent weeks. Employment rose slightly

and wages increased moderately, due in part to recent minimum wage increases in some Fifth District jurisdictions.

Price growth remained robust; however, there were several reports that customers were starting to reject further price

increases or insist on reduced prices.

Labor Markets

Manufacturing

Employment increased slightly in the Fifth District over

the most recent reporting period. Contacts continued to

report a lack of qualified workers as a significant issue for

their business. A Maryland construction contact reported

better than expected demand, but projects were slowed

by a shortage of skilled labor. A South Carolina staffing

firm said that demand for engineering and skilled trades

workers has been consistently high and doesn’t show

signs of slowing. Wages picked-up moderately, due in

part from increases in the minimum wages in Maryland,

Virginia, and the District of Columbia. A Virginia retailer

reported that the minimum wage increase resulted in

wage increase for all workers, not just those making the

minimum.

Manufacturing activity in the Fifth District softened modestly in recent weeks. Overall, manufacturers reported a

decline in new orders. A fabric manufacturer that produces products for retail stores said that they were working

through an inventory glut, and were hoping that as inventories clear, new orders would increase. Manufacturers

also reported more push-back from clients on price

increases. A label printer reported increased pressure

from purchasing teams to reduce pricing this year. With

supply chain pressures easing, purchasing teams were

“raging back and shopping the business.” Finding workers remained an issue. An aluminum producer cited that

growth is limited severely by availability of skilled labor

and administrative workers.

Prices

Ports and Transportation

Prices continued to grow at a strong rate, particularly for

services. According to our recent surveys, manufacturers

reported average price increases around 5.5 percent, but

this was down considerably from the peak set in 2022.

Services sector firms, on the other hand, saw prices

continue to rise at a near-peak rate of about 6.5 percent.

There were some reports by firms in both sectors that

customers were starting to push back on further price

increases. One manufacturer said that they were under

pressure to cut prices, which would compress margins as

input costs were still rising.

Fifth District ports reported a sharp decline in loaded

import volumes this period. Imports of retail goods and

household related items were down. Additionally, due to

the extended Chinese New Year, there was an increase

in blank sailings. Loaded exports were stronger and

driven by auto and machine parts as well as rolling

stock. Empty containers were dwelling slightly longer at

the port. Shipping carriers had excess availability this

period. Spot rates fell to pre-pandemic levels or below

and were significantly under current contract rates. Air

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Federal Reserve Bank of Richmond

cargo demand continued to soften with airfreight rates

stabilizing as airlines pulled back on freight capacity.

creased in the last month, particularly in the office sector.

Retail and industrial/flex space leasing remained robust

this period. The industrial market continued to be strong

with higher rental rates and good absorption rates. However, rents were moderating in other commercial real

estate sectors and landlords were increasing their incentives and concessions. Rising interest rates slowed sales

and commercial real estate capital markets activity was

negligeable. Some banks had stopped lending for new

commercial construction projects and/or had tightened

underwriting standards; many equity lenders also had

left the market. Many respondents cited a looming issue

of certain CMBS loans that are coming due in 2023

being unable to qualify for refinancing.

Trucking firms reported a moderate decline in freight

volumes this period. Respondents indicated that there

was excess capacity in the truck load segment but lessthan truckload demand was not down as much. Spot

market rates decreased slightly with carriers experiencing some push back from customers on further rate

increases. Trucking firms stated that in response to

lower freight volumes, they were still adding drivers, but

they had scaled-back recruiting and were being very

selective in hiring. Availability of new tractors and trailers

from manufactures continued to improve and there was

a glut of used trucks on the market due to a few regional

trucking companies going out of business.

Banking and Finance

Loan demand continued to slow modestly across almost

all loan types, with the most weakness seen in the commercial loan portfolio. Consumer loan demand was

mixed, with home equity and used auto loans showing

some increased demand over the last few months. Consumer mortgage demand, especially refinancings, have

slowed, which contacts attributed to rising rates. Deposit

levels declined slightly, on balance, however a few

banks did see an inflow of deposits following the failure

of Silicon Valley Bank. Loan delinquencies continued to

increase, albeit slightly and still not to pre-covid levels.

Financial institutions expected moderate declines in loan

and deposit levels for the remainder of the year.

Retail, Travel, and Tourism

Fifth District retailers reported a slight pull back in sales

and demand in recent weeks. An auto dealer said that

sales were down and customers seemed skittish about

making big ticket purchases. Similarly, an appliance and

electronics store saw a slowdown in demand and customer traffic. A couple of retailers, however, noted that

their typical busy season doesn’t start until April, so they

were expecting business to pick up soon.

Travel and tourism increased moderately in recent

weeks. Hotels in the Fifth District reported increases in

the number of rooms sold and because room rates were

higher than last year, revenue growth was strong. One

hotel in South Carolina said that their business was

highly tied to events in the area and volumes were up in

recent weeks because of sports tournaments. Lastly, a

regional airport saw a rebound in air traffic but to a level

still slightly below 2019 levels; however, they expected

to surpass 2019 levels by this summer.

Nonfinancial Services

Nonfinancial service providers continued to report steady

demand for their services along with stable revenues.

Providers also continued to express concerns over their

ability to attract and retain employees. Common themes

that were noted were the higher wages demanded by

applicants, a lack of qualified employees, and retaining

new hires employed after they arrive on the job. Firms

reported getting push back from clients and customers

over price increases and some were considering looking

for lower cost alternatives or to cut costs elsewhere in

their business to offset these higher prices. ■

Real Estate and Construction

Residential real estate respondents noted that so far it

hasn’t been the typical robust spring market, evidenced

by a decline in both sales and pending sales. Days on

market have increased, but still not above the historic

average; housing inventory has decreased year-overyear with substantially less new listings. Sales prices

have remained flat for this period, but new contracts

were starting to come in at less than list price. Many

potential home buyers were priced out and sellers were

having to offer concessions to close deals. Higher mortgage rates have made finding affordable homes even

more of a challenge. Construction costs were down, but

overall, home builders are no longer acquiring new

building lots due to economic uncertainty.

For more information about District economic conditions visit:

www.richmondfed.org/research/data_analysis

Overall commercial real estate market activity de-

E-2

Federal Reserve Bank of

Atlanta

The Beige Book ■ April 2023

Summary of Economic Activity

The Sixth District economy grew at a modest pace from mid-February through March. Labor markets improved, and

wage pressures diminished slightly amid increasing labor availability. Some nonlabor costs such as shipping,

eased, while others, like construction materials, remained volatile. Retail sales softened, but demand for new autos

was robust. Tourism activity remained healthy. Demand for housing improved amidst lower mortgage interest rates

and declining home prices. Demand for commercial real estate remained mixed. Transportation activity was

unchanged, on balance, from the previous report. Manufacturing activity was mixed with consumer confidence cited

as a risk. Loan growth at banks remained strong despite concerns about liquidity. Activity in the energy sector was

mostly healthy. Agriculture conditions remained mixed.

Labor Markets

like food inputs and construction materials saw

continued volatility and this, coupled with elevated

labor costs, kept firms from passing easing cost

pressures on to customers. The Atlanta Fed’s Business

Inflation Expectations survey showed year-over-year

unit cost growth at 3.8 percent, on average, in March,

up significantly from 3.5 percent in February. Firms'

year-ahead inflation expectations increased to 3.1

percent, on average in March, up significantly from 2.9

percent in February.

Labor market conditions continued to improve.

Contacts noted that many positions were easier to fill,

and most indicated retention had improved. However,

businesses continued to cite challenges including acute

shortages of various positions (for example, in

hospitality, accounting and transportation), confronting

an aging labor force, and facing sustained demand for

flexible work arrangements by employees. Most firms

have been hiring to back-fill open positions while a

small number were hiring to grow business. Several

firms noted efforts to move away from underperforming

lines of business by downsizing through both attrition

and layoffs while staffing up more profitable lines.

Contacts noted turning to automation to fill repetitive,

understaffed roles, and some have begun to leverage

the use of artificial intelligence in lieu of hiring for

certain professional positions.

Consumer Spending and Tourism

Retail sales softened over the reporting period but

remained above pre-pandemic levels. Retailers

continued to report that inflationary pressures have

caused lower-income consumers to be more selective

with discretionary spending. However, automobile

dealers reported strong demand for new vehicles as

inventory levels improved. Contacts were cautiously

optimistic for the remainder of the year in spite of

continued inflationary pressures and rising interest

rates.

Most contacts noted some relief from wage pressures

and expressed certainty that wage growth would

moderate further this year.

Travel and tourism activity was little changed from the

previous report. Demand for leisure travel remained

healthy and was described as normalizing from

unsustainably high year-earlier levels. Business travel

continued to recover. Hotel average daily rates

remained above pre-pandemic levels and travelers'

spending on experiences continued to be robust.

Prices

Contacts reported continued improvement in supply

chain issues and shipping capacity, which has helped

ease transportation cost pressures. Even though

contracts still carried elevated escalation or

contingency clauses, some degradation in pricing

power at the wholesale level was reported. Buyers

were reportedly winning more concessions compared

to the last two years of a take-it-or-lose-it price

environment. However, various other nonlabor costs

Construction and Real Estate

Though still weaker than a year ago, housing demand

throughout most of the District was boosted by lower

mortgage interest rates and continued declines in

F-1

Federal Reserve Bank of Atlanta

home prices. A higher percentage of homes have sold

below asking price and median home prices in many

metro areas declined from peak levels reached in 2022.

This, combined with lower interest rates, has led to a

steady improvement in home ownership affordability and

increased demand for housing. Activity has been

stronger in the entry-level price points compared to

more high-end homes. However, inventory remained

near historic lows in most markets. Cancellations in the

new home market moderated and some homebuilders

have increased speculative home inventory.

recent bank failures and their level of uninsured

deposits held at a single institution; however, banks

have not experienced a large outflow of deposits.

Unrealized losses remain elevated, limiting the ability to

sell securities for liquidity without negatively impacting

capital. Despite concerns about liquidity, banks

indicated loan growth remained solid over the reporting

period.

Energy

Energy contacts noted robust activity in exploration and

production, crude oil refining, power infrastructure

projects, liquefied natural gas, and renewable energy

projects. Strong global demand and federal dollars for

decarbonization from the Inflation Reduction Act were

cited as factors influencing activity strength. Chemical

manufacturers reported softening in the chemicals

space, largely for housing sector inputs. Utility providers

also reported some slowing in industrial segments tied

to housing. Commercial and residential utility segments,

however, remained strong.

Commercial real estate (CRE) conditions were mixed.

The industrial sector remained healthy, while office,

multifamily, and some segments of retail slowed. An

increasing number of contacts reported concerns about

rising costs outpacing rent increases. More employers

requiring staff to return to the office has helped stabilize

some segments of the market; however, a significant

amount of available sublease space is expected to

create headwinds. A rising number of contacts

mentioned concerns about the availability of financing

as some banks reduced funding commitments amid

weaker lending from larger financial and non-bank

institutions. Concerns over declining CRE values

accelerated.

Agriculture

Agricultural conditions were mixed. Domestic supplies

of chicken exceeded demand as the Avian Flu limited

exports. However, foreign demand for poultry improved

as some countries loosened import regulations.

Demand for eggs exceeded supply but softened in

response to elevated prices. Cattle supply remained

low, and beef producers expressed concerns that falling

chicken prices may cause consumers to substitute

chicken for beef. Demand for cotton and soybeans fell

from already low levels. Contacts expect reduced

plantings of cotton this year as discretionary spending

softens. Contacts noted continued supply chain

improvements.■

Transportation

Transportation activity was largely consistent with the

previous report. Ports continued to see a slowing in

container trade, though volumes remained above prepandemic levels. Shipments of autos and heavy

machinery through District ports increased. Railroads

reported further declines in overall freight shipments. Air

cargo contacts noted significant year-over-year volume

declines. Truck capacity remained readily available, and

some trucking contacts noted expectations for an

improvement in volumes later this year.

Manufacturing

Some manufacturers reported significant slowing in

activity, especially firms producing inputs for residential

construction, where declines were attributed to elevated

mortgage rates and persistently high construction costs.

Lead times and supplier delivery times improved, and

supply chains were characterized as normalizing. Auto

manufacturers noted strong demand; however,

consumer confidence was cited as a risk to the outlook.

Banking and Finance

Liquidity pressures persisted for some District financial

institutions. Banking contacts reported that a limited

number of customers expressed concerns about

For more information about District economic conditions visit:

www.atlantafed.org/economy‐matters/regional‐economics

F-2

Federal Reserve Bank of

Chicago

The Beige Book ■ April 2023

Summary of Economic Activity

Economic activity in the Seventh District was little changed overall in late February and March. Contacts generally expected slow growth in the coming months, though many expressed concerns about the potential for a recession in the

coming year. Employment increased moderately; consumer spending, business spending, and construction and real

estate were flat; nonbusiness contacts saw little change in activity; and manufacturing demand decreased modestly.

Prices and wages rose moderately, and financial conditions tightened moderately. Banking contacts reported some

movement in deposits but little change in credit availability following the collapse of Silicon Valley Bank. Agricultural

incomes were expected to be lower in 2023 than in 2022.

Labor Markets

Consumer Spending

Employment increased moderately over the reporting

period and contacts expected slower employment growth

over the next 12 months. Many contacts continued to

have difficulty finding workers, especially those in the

skilled trades. At the same time, however, many said

hiring was easier compared with a few months ago.

Some manufacturers reported that with a slowdown in

orders, they were feeling less urgency to fill open positions and were more willing to wait for the right candidate. One contact in state government saw signs of less

labor hoarding, as businesses were making less of an

effort to keep underutilized or underperforming workers.

Wage and benefit costs rose moderately, with several

contacts indicating that regular annual wage and benefit

increases had recently taken effect.

Consumer spending was unchanged on balance over

the reporting period. Nonauto retail sales were slightly

softer, with contacts noting declines for gasoline and

building materials and lower than expected sales of

furniture and electronics. Light vehicle sales were unchanged overall, and service and parts demand remained strong. Leisure and hospitality spending increased slightly, driven by greater spending in travel

categories such as cruise lines and travel agencies.

Business Spending

Business spending was stable overall in late February

and March. Capital expenditures increased modestly,

with several contacts reporting spending on renovation

or expansion of existing structures. Demand for transportation services decreased some, though activity remained at a high level. Demand for residential, commercial, and industrial energy decreased slightly, with one

contact highlighting declines from manufacturing and

small commercial enterprises. Inventories for most retailers were at comfortable levels. Though auto inventories

continued to move up, according to a survey of dealers

they were still only around half of pre-pandemic levels. In

manufacturing, inventories stayed slightly elevated, and

many contacts indicated that they were no longer experiencing supply chain disruptions. A construction contact

Prices

Prices rose moderately in late February and March, and

contacts expected a similar rate of increase over the

next 12 months. Producer prices rose modestly, with

contacts highlighting higher costs for raw materials

(particularly steel) and energy. Several contacts noted

that growth in shipping costs had slowed noticeably,

particularly for containers and ocean freight. Consumer

prices generally increased due to the continued elevated

level of demand and the passthrough of higher costs.

G-1

Federal Reserve Bank of Chicago

noted that materials availability had improved to the point

that certain suppliers were no longer taking orders more

than a few weeks in advance.

Agriculture

With input costs remaining elevated and many product

prices down, contacts expected lower agricultural income for the District in 2023 compared with a strong

2022. Wheat prices were generally lower over the reporting period, during which the agreement for exporting

grain from Ukraine was extended into May. Corn and

soybean prices were also lower despite smaller estimates for the South American harvest. Planting delays

were likely in some places in the District due to excess

precipitation, though contacts noted the extra moisture

could also recharge ground water levels for use later in

the growing season. Although fertilizer costs fell, the cost

of most other inputs remained high for crop farms. Cattle

prices increased as the U.S. herd was squeezed by

drought and a harsh winter. Egg prices moved up, while

dairy and hog prices were down. High feed costs continued to compress most livestock margins. Prices for

agricultural land continued to rise, reportedly at a slower

pace.

Construction and Real Estate

Construction and real estate activity was little changed

on balance over the reporting period. Residential construction decreased slightly, while residential real estate

activity was up modestly across segments. One contact

attributed the pickup in sales to lower mortgage rates.

Home prices and rents moved up modestly. Nonresidential construction activity was little changed overall,

though contacts highlighted renovation of hospitality

space as an area of growth. Elevated construction costs

continued to hold back new projects. Commercial real

estate activity decreased moderately, though some

contacts said deal flow was still at a healthy level. Demand for leased multifamily space increased while demand for office space continued to fall. Prices and rents

were down slightly. Vacancy rates increased slightly, and

the amount of sublease space grew modestly.

Community Conditions

Manufacturing

Community development organizations and public administrators reported little change in overall economic

activity through March. Demand for social services remaining elevated despite reports of overall economic

strength. State government officials again saw healthy

growth in tax revenues and low levels of unemployment

insurance claims. Despite slow growth and funding challenges, small businesses and nonprofits continued to be

focused on employee recruitment and retention and

were not reporting plans for layoffs. High interest rates

and elevated supply costs continued to challenge plans

to expand availability of affordable housing units and

childcare facilities, non-profit developers reported. Family-facing organizations said there were signs of slower

growth in consumer prices; however, the end of Covidera benefits was putting new stress on household budgets. ■

Manufacturing demand decreased modestly in late February and March. Steel orders decreased slightly. Fabricated metals orders were down modestly, with several

contacts citing the automotive sector as a reason for

declines. Auto production fell slightly. Machinery sales

were up slightly, and one contact highlighted stronger

demand from the aerospace sector. Heavy truck orders

moved up slightly and backlogs remained very high.

Banking and Finance

Financial conditions tightened moderately over the reporting period. Bond and stock markets saw little change

in asset values on net, though volatility spiked and asset

values temporarily fell following the collapse of Silicon

Valley Bank (SVB). Banking contacts reported fielding

some inquiries about deposit safety after SVB’s failure

and also saw some deposit transfers. A contact at a

large bank that received new deposits was uncertain

whether the deposits would stick once there was more

clarity about the health of smaller banks. Business loan

volumes decreased slightly, with one contact noting that

clients producing durable goods were most likely to be

struggling. Business loan quality was stable, and contacts did not report changes in lending standards. The

consumer loan market saw a slight decrease in the

volume of loans, led by further declines in refinancing

activity. Consumer lending standards tightened slightly,

while loan quality was stable.

For more information about District economic conditions visit:

chicagofed.org/cfsec

G-2

Federal Reserve Bank of

St. Louis

The Beige Book ■ April 2023

Summary of Economic Activity

Economic conditions have remained unchanged since our previous report. Although labor markets remain tight, contacts reported further improvement in their ability to hire and retain workers. Firms struggled to pass on higher costs to

customers, which resulted in wage growth compressing profit margins. Consumer spending was mixed, with reports of

weaker demand among low-income consumers but more robust demand among high-income consumers. Construction

and manufacturing contacts reported that supply chains continued to improve. The real estate sector saw home sales

increase and inventory continue to decline, though rental rates remained flat. The banking sector saw loan growth slow

and deposits fall, but expressed confidence in their overall position.

Labor Markets

Prices

Employment has increased slightly since our previous

report. Although labor markets remain tight overall,

reports of easing have increased since our previous

report. While unemployment rates remain low and hiring

workers is still a challenge, more contacts have been

reporting an ability to hire and retain workers to meet

demand than in recent months. A railroad contact in

Louisville reported reaching full capacity in employment

for the first time post-pandemic. A St. Louis staffing

company, although still reporting hiring challenges and

churn in the market, has seen these issues begin to

relax compared with last year. A Memphis contact reported labor shortages and retention problems are no

longer widespread and are primarily affecting the service

industry.

Prices have increased modestly since our previous

report. Overall, contacts project increasing prices, but at

a slower pace compared with the previous few quarters.

Despite increasing input costs, business contacts reported a decreased ability to pass on costs to consumers

due to increased price sensitivity of consumers and the

desire to maintain competitive pricing. Of businesses

that reported the ability to increase prices, the projected

change in prices varied. A contact in the car industry

indicated only slight increases in prices, while a contact

in the hospitality industry estimated a larger 6-10% increase in prices.

Consumer Spending

District general retailers, auto dealers, and hospitality

contacts reported mixed business activity and a mixed

outlook. In Little Rock, some stores saw less and morevolatile foot traffic, whereas others reported that higherincome consumers are starting to spend more again. A

St. Louis auto dealer reported that business activity did

not change over the past month, and they have a positive outlook for spring and summer. This dealer also

noted that sales of luxury cars have not decreased, since

the people who buy luxury cars are typically cash buyers

and they are less affected by interest rates. A restaurant

contact in Memphis reported that business has been

Wages have continued to grow slightly since our previous report. Companies reported slow wage growth due

to difficulties transferring labor costs onto consumers

and slightly improved labor supply. An insurance contact

in Louisville reported rising wages cutting into their profit

margins, and a home building contact in Little Rock

reported margins being down 15-20% due to increased

wages for employees.

H-1

Federal Reserve Bank of St. Louis

stable, and they are careful about increasing prices to

avoid driving away customer demand. The hospitality

industry in Louisville is pessimistic about the tourism

industry’s chances of returning activity to pre-pandemic

levels.

Construction demand remains steady despite high interest rates. Contacts reported opportunities to bid on jobs

if they have available capital. One St. Louis construction

contact reported increased delays in project start times

since our previous report. An Arkansas contact reported

that, due to labor shortages, construction firms are winning bids and finding smaller subcontractors to bid on

the jobs they have been awarded.

Manufacturing

Manufacturing activity has slightly decreased since our

previous report. Firms in Missouri have reported a slight

uptick in new orders, while firms in Arkansas have reported a slight decrease in new orders and a small rise

in production. Raw material prices continue to decrease,

with products from Asia returning to pre-pandemic levels.

Supply chains continue to improve but remain suboptimal relative to before the pandemic. The manufacturing

industry continues to expand in the region: Two companies in Lee County, Mississippi, added over 60 employees, which represents $2 million in each of their payrolls.

Banking and Finance

Banking conditions in the District have remained stable

since our previous report. Loan growth in the commercial, industrial, and consumer lending sectors all declined

slightly—a continuation of the cooldown in loan demand

since the beginning of 2023. Real estate loan growth, on

the other hand, saw an uptick. Total deposits fell. Contacts expect net interest margins to begin contracting if

they have not already, as deposit costs are still increasing. Asset quality remains good, and bankers in the

District are closely monitoring debt that will be renewed

at higher interest rates this year. Memphis banking contacts reported a renewed focus in the industry on liquidity

in light of recent bank failures, while expressing confidence in their diverse and strong deposit base. One

Memphis-area contact reported inflows from local residents who had previously held deposits in distressed

West Coast banks.

Nonfinancial Services

Activity in the nonfinancial services sector has remained

stable since our previous report. While air passenger

traffic has increased, freight traffic has slightly decreased. In Northwest Mississippi, access to rural

healthcare continues to be affected by rising costs and

low Medicare reimbursements, which have caused hospitals to delay investment in new structures and services.

Investment in technical training increased across the

District. A community college in Tennessee has partnered with local businesses to provide customized workcentered training and short-term credentials to address

student concerns about the rising cost of education and

local business concerns about the lack of qualified workers. Similarly, community colleges in the St. Louis area

are investing in advanced manufacturing training programs by procuring high-end equipment, building new

facilities, and developing new curriculums to accommodate more students. Memphis-area nonprofits reported

that volunteer engagement has increased since our

previous report.

Agriculture and Natural Resources

District agriculture conditions have seen little change

since our previous report. The number of acres planted

in the District for corn, cotton, rice, and soybeans increased around 1% compared with last year; outcomes

were similar for all District states. The composition of the

crops has changed; cotton and soybeans were planted

in lesser quantities compared with last year, while corn

and rice increased in acreage. Southern parts of the

District have planted significantly fewer acres of cotton

and replaced it with corn and rice.

Natural resource extraction conditions declined moderately from February to March, with seasonally adjusted

coal production decreasing 9%. March production was

also down moderately compared with a year ago, falling

over 5%. ■

Real Estate and Construction

Home sales in all four major District MSAs have increased since our previous report. The median sale price

of listings in Memphis has increased significantly, and

other major District MSAs have seen small increases in

median sale price. Inventory has dropped in all four

major District MSAs since our previous report. However,

rental rates remain unchanged.

Commercial real estate continues to see low demand for

large office spaces. In Northwest Arkansas, one contact

reported high demand for commercial warehouses,

which has resulted in a vacancy rate of less than 1%.

H-2

Federal Reserve Bank of

Minneapolis

The Beige Book ■ April 2023

Summary of Economic Activity

The Ninth District economy grew slightly since the previous report. Employment gains were modest; labor demand

remained high, but signs of softness also appeared. Wage pressures rose slightly and remained at high levels. Price

pressures were steady at high levels. Consumer spending was flat, though activity varied in different segments. Commercial construction rose slightly, but residential construction continued to be slow. Commercial real estate was flat, and

residential real estate remained very slow. Manufacturing activity contracted slightly, and agricultural conditions remained strong. Activity among minority- and women-owned businesses was steady. A substantial majority of contacts

reported no effect on their organization from recent banking turmoil.

Labor Markets

Prices

Employment grew modestly since the last report.

Contacts reported a slight drop in job openings, but

overall demand for labor remained healthy. A monthly

business conditions survey showed that overall hiring

sentiment remained positive; staffing contacts also noted

increases in job orders with the coming of spring. Layoffs

appeared to increase, but mass layoff events were still

low. A Minnesota staffing firm said that businesses were

“exfoliating the workers they don't need.” A Wisconsin

workforce contact said that hiring had softened; there

was not widespread downsizing, but more the

“abandonment” of recruiting for unfilled positions.

Several sources noted that turnover also appeared to be

ebbing and could be a factor in lower job postings.

Numerous contacts said labor availability improved

slightly. A Wisconsin staffing contact said the number of

job applicants rose “but the quality is not strong.” Still,

job placements were growing because clients “are

becoming more open to more-questionable candidates.”

Price pressures were steady since the last report, though

levels remained elevated. Price pressures for inputs

were greater on balance than for final goods, according

to contacts. About half of respondents to a District

business conditions poll reported no change to the prices

they charged for their products and services in March

from a month earlier, compared with a third reporting

increases. Nearly two-thirds of hospitality and tourism

contacts reported that inflationary pressures had gotten

somewhat or much worse over the past three months.

Several manufacturing contacts reported more

resistance from customers to price hikes. Construction

contacts reported that although prices of lumber and

certain materials have retreated from highs, prices of

other inputs, such as furnishings, remained elevated.

Retail fuel prices in District states increased moderately

overall since the previous report. Prices received by

farmers in February increased from a year earlier for

corn, soybeans, potatoes, hay, cattle, turkeys, and eggs;

prices decreased from a year earlier for wheat, milk,

hogs, chickens, sugar beets, dry edible beans, lentils,

and canola.

Wage pressures remained high but there were small

signs of easing. Most contacts reported that they still

needed to offer higher wages than previously to fill open

positions. A staffing firm reported that wages for

industrial positions had risen more than 10 percent over

the past year, and additional increases were expected.

But multiple contacts said there was less need for offcycle pay increases, and raises were returning to an

annual frequency.

Worker Experience

Job seekers continued to prioritize higher pay and

greater flexibility as they looked for jobs and remained

positive overall about their prospects. Many showed a

strong willingness to learn new skills and consider a

different line of work to advance their goals. Minnesota

I-1

Federal Reserve Bank of Minneapolis

and South Dakota immigrant workers employed in

agriculture, food processing, and manufacturing reported

stable employment conditions. Some wished to find

employment outside their current industry but were

limited by language barriers and job proximity. A food

processing worker in her sixties said she reduced her

working hours because driving in the winter was difficult,

but she did not plan on retiring soon. "We came here to

work, retirement is not for us," she added. Others shared

similar sentiments.

amount of new supply coming online. Office space saw

the opposite trend, with vacancies rising despite no new

supply. Residential real estate remained slow, with

higher mortgage rates heavily impacting sales. Available

data on closed and pending home sales in March

showed moderate-to-large declines across the District. A

lack of inventory kept home prices elevated.

Manufacturing

Manufacturing activity decreased slightly since the last

report. A regional index of manufacturing conditions

indicated contraction in activity in March from a month

earlier in Minnesota, North Dakota, and South Dakota.

Manufacturing respondents to a District business

conditions survey reported overall unchanged sales in

March from a month earlier, though expectations for April

were higher and many contacts noted strong backlogs.

Inventories increased slightly, according to contacts, and

several noted that supply chain pressures had eased. A

producer of inputs for large engines and industrial

equipment reported that it was expecting a dramatic

reduction in sales and was planning to reduce staff by 20

percent in response. A producer of food and beverage

equipment noted that “customers are hesitant to invest in

costly equipment when interest rates are so high.”

Consumer Spending

Consumer spending rose slightly since the last report,

with varied activity among different segments. Minnesota

retail contacts reported modest sales growth in recent

weeks. However, foot traffic at some South Dakota

retailers has reportedly slowed compared with last year,

said a contact there. The lodging industry in Minnesota

and Montana continued to see healthy demand in March.

However, industry contacts in both states noted some

signs of softening demand. Vehicle sales in Minnesota

and Wisconsin in March were lower compared with last

year; in the western part of the District, sales at a

dealership with multiple locations were slightly higher for

new vehicles, despite inventory shortages, but 12

percent lower for used vehicles. Recreational,

powersport, and marine vehicle sales remained

subdued, with the RV industry “bloated with inventory,”

according to a contact, and higher interest rates

dampening demand. Spring break airline traffic has been

brisk, with monthly passenger levels at some District

airports seeing double-digit growth over last year.

Agriculture, Energy, and Natural Resources

District agricultural conditions were stable at strong

levels entering the planting season. Most contacts

reported that farm incomes continued to increase from a

year earlier, while capital spending was steady.

However, persistent wintry weather, including a severe

snowstorm, delayed preparation for spring planting in

many areas. District oil and gas exploration activity was

unchanged since the previous report.

Construction and Real Estate

Commercial construction rose slightly since the last

report. While new office projects remain slow, other

sectors remained active, especially with the coming of

spring. Industry data showed that recent nonresidential

activity has been on par with last year. Contacts also

reported that multifamily construction has remained

healthy. A small sample of construction contacts

reported that March sales were higher, on average, than

a month earlier, and they had similar expectations for the

coming month. Residential construction, on the other

hand, was still in the doldrums. The number of singlefamily units permitted in March was down more than 40

percent, year-over-year, in the Minneapolis-St. Paul

region; even larger declines were seen in Rochester,

Minn., Bismarck and Fargo, N.D., and Sioux Falls, S.D.

Minority- and Women-Owned Business Enterprises

Minority- and women-owned businesses reported little

change in activity compared to last period. A few were

concerned that their inability to pass on increased input

and labor costs through final prices was beginning to

threaten their existence. A number of contacts were still

unsuccessfully looking for workers; they quoted wage

competition and mismatched skills as the main reasons.

Sentiments around recent banking events were mixed.

While some expected their access to credit to further

narrow, others expected little or no impact. A contact

working with startups expected area entrepreneurs in the

tech sector to be affected but was unsure as to what

extent. ■

Commercial real estate was flat since the last report. In

the Minneapolis-St. Paul region, leasing activity for

industrial property remained strong, and vacancy rates

fell slightly in the first quarter, despite a considerable

For more information about District economic conditions visit:

minneapolisfed.org/region-and-community

I-2

Federal Reserve Bank of

Kansas City

The Beige Book ■ April 2023

Summary of Economic Activity

Total economic activity across the Tenth District declined slightly in March and April. However, almost every business

contact reported no pull back in planned capital expenditures, hiring plans or planned wage increases in response to

recent financial market volatility. Hiring activity slowed, leaving total District employment mostly unchanged. Worker retention was reportedly much higher, even as wage growth slowed. Consumer spending declined slightly. Households pulled

back most on bigger ticket items like cars or home maintenance and improvements. Prices continued to rise at a moderate pace. Several food manufacturers indicated they do not expect to be able to negotiate the same pace of price increases as they did over the past year in the coming months. Deposit outflows at community and regional banking organizations raised funding challenges for many organizations in recent weeks. However, community development financial

institutions, which typically serve microbusinesses and low-to-moderate income borrowers, reported stable funding conditions despite recent financial volatility. Agricultural lenders also indicated stable liquidity to support lending over the medium term. Generally, lenders expected somewhat tighter lending standards and stricter pricing related to credit risks in

coming months.

Labor Markets

Prices

Manufacturing employment in the Tenth District increased modestly in recent weeks, which contacts tied to

a better ability to recruit for open positions rather than an

increase in overall demand for workers. Restaurant

owners, hotel operators and most service businesses

indicated that employment changed little over the past

month. Although employment in healthcare grew at a

moderate pace over the last month, labor demand at

healthcare establishments slowed moderately in some

parts of the District. Job losses in tech occupations were

concentrated among larger companies operating in the

region. Contacts noted that tech workers were finding

new employment opportunities within a couple of weeks

on average, but often at somewhat lower pay. Expected

employment growth was reportedly much lower than just

a few months ago.

Prices rose moderately across the District. Services

contacts reported selling prices grew only slightly. Yet,

most contacts at services businesses anticipate changing their prices more frequently compared to the previous year, taking opportunities to raise prices incrementally when available. Most businesses said their recent

difficulty with passing cost increases through to customers compressed their profit margins, with most indicating

they expect to increase prices further over the medium

term to rebuild lost profitability. One notable exception

was processed food categories, where contacts do not

expect to be able to negotiate as large, or as many, price

increases with grocers as they did last year.

Consumer Spending

Household spending continued to fall slightly in recent

weeks. Purchases of larger ticket items, such as cars or

spending on home construction projects, declined significantly. Offsetting those declines were robust spending

growth at restaurants and a rebound in leisure travel

activity. Several contacts noted in-store retail spending

growth picked up slightly, but also highlighted that the

distinction between brick-and-mortar and online sales is

less important as most establishments have developed

some sort of online sales platform.

Across industries and geographies, contacts reported

that wage growth is slowing significantly compared to

last year, and that mid-cycle wage increases are much

less likely this year. Despite slowing wage growth, most

businesses indicated that worker retention improved in

recent weeks. Most contacts characterized expected

wage growth over the near term as being above growth

rates expected over the long term.

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Federal Reserve Bank of Kansas City

Community Conditions

Community and Regional Banking

Community Development Financial Institutions (CDFIs)

across the District reported they have generally not

experienced adverse effects resulting from the recent

volatility in the banking sector so far. Most contacts

reported their banking relationships were strong, with

some banks proactively reaching out to quell any concerns about funding commitments. CDFIs expect strong

and increasing loan demand as an alternative and competitive lender to commercial banks, especially as banks

tighten credit. Looking ahead, several CDFIs reported

concerns about the ability of businesses to pay on loans,

especially as more Economic Impact Disaster Loan

payment deferments continue to expire throughout the

year.

After tightening credit standards over the past several

weeks, many contacts reported expectations for further

tightening or more strict pricing related to credit risks.

Loan demand also weakened modestly in the past

month, driven by increased borrowing costs and economic uncertainty. Most notably, contacts reported

weaker demand in commercial real estate and commercial and industrial loans, though declines were broadbased. Credit quality remained stable, but contacts continued to expect loan quality to deteriorate over the next

six months. Deposit levels declined moderately as large

depositors withdrew uninsured balances amid the volatility in the regional banking sector and ongoing intensity of

rate competition.

Manufacturing and Other Business Activity

Energy

Manufacturing activity was unchanged from recent

months while activity at services businesses declined

slightly. In response to recent financial volatility, almost

every contact reported they quickly assessed their distribution of bank deposits; however, most business contacts reported no pull back in capex plans, hiring plans or

planned wage increases resulting from recent events.

Expectations of production and sales over the next six

months were little changed, except in technology sectors

where business activity is expected to decline moderately.

Tenth District energy activity declined moderately over

recent months. The number of active gas rigs in the

District decreased as natural gas prices continued to

decline below profitable levels, and prices were expected

to remain in an unprofitable range over coming months.

However, declines in the number of active oil rigs were

modest, as firms expect oil prices to remain in a profitable range in the near term, albeit with profitability falling

in recent months. In line with these expectations, oil

producers reported access to credit over the last month

remained unchanged despite banking disruptions. The

average price needed for a substantial increase in drilling to occur remains above near-term oil and gas price

expectations, constraining future production growth.

Most business contacts reported higher cost pressures

across several key inputs and anticipate persistent cost

pressures in the coming year. Accordingly, capital

spending growth slowed relative to last year and is expected to decline over the next six months.

In contrast, District contacts in the venture capital and

start-up space reported a much more adverse outlook

compared to just a couple of months ago as a direct

result of the closure and challenges among the key

lenders to the sector. Businesses tended to point to

prolonged declines expected for the start-up ecosystem,

rather than declines in certain segments of the startup

community, such as life/bio sciences or tech services.

Agriculture

Real Estate and Construction

Agricultural economic and credit conditions in the Tenth

District were reportedly strong. Elevated commodity

prices continued to support profit opportunities for many

producers. Farm loan repayment rates improved at a

gradual pace in the first quarter and indicators of credit

challenges were limited. Agricultural bankers throughout

the region also reported that their liquidity was adequate

to meet current credit demand and deposit withdrawals.

The impact of higher interest rates on borrower finances

and farmland markets was reportedly a growing concern.

More broadly, drought and elevated production costs

continued to affect many areas of the region. ■

Vacancy rates at commercial properties increased moderately in recent weeks, most notably at office properties.

Yet, contacts indicated use of warehousing and distribution space, which had been the strongest property segment over the last year, declined over the past month.

Several contacts noted subleasing prices declined further. Following the recent financial market volatility, most

contacts noted that lending for commercial real estate

development is almost completely unavailable. From the

lender side, one contact commented “we’d already been

focusing only on premium deals, but now we are being

even stricter about what ‘premium’ means.”

J-2

Federal Reserve Bank of

Dallas

The Beige Book ■ April 2023

Summary of Economic Activity

The Eleventh District economy continued to expand modestly. Manufacturing output rose slightly following a mild contraction in the previous period. Growth in the service sector continued at a modest pace, and retail sales and energy

activity were flat. Loan demand weakened further, loan volumes fell, and credit conditions tightened. Agricultural conditions remained strained by drought in some areas. Home sales rose. Local nonprofits cited higher demand for assistance. Overall payrolls rose modestly, though hiring slowed sharply in the service sector. Wage growth remained elevated, while price pressures eased notably. Outlooks worsened, and uncertainty surged, partly due to heightened apprehension about the recent banking sector issues and high interest rates, and their spillover effects on the broader economy.

broadly, bringing price growth close to or below its historical average in manufacturing and services. Homebuilders continued to use incentives and discounts to close

sales. Airlines said ticket prices remained elevated, while

energy firms reported declining rental rates for drilling

rigs and said they expect cost inflation to continue slowing. More than a third of firms responding to a March

Dallas Fed survey of nearly 400 Texas business executives cited inflation as a primary outlook concern over the

next six months.

Labor Markets

Employment increased modestly during the reporting

period. The pace of hiring picked up in manufacturing but

slowed in energy and nearly stalled out in services.

Difficulty hiring workers remained a top concern for many

firms, though a few reported some improvement. Airlines

cited capacity constraints due to pilot shortages, and a

workforce development contact said some employers

were taking a closer look at non-traditional talent pipelines to fill positions. In contrast, staffing firms noted

clients were taking longer to make hiring decisions in

part due to the increased economic uncertainty, and

there were scattered reports of layoffs in constructionrelated manufacturing and upstream energy.

Manufacturing

Texas factory output expanded slightly in March after

declining in February. New orders for manufactured

goods continued to contract, however. Weakness in

demand was most pronounced in primary metals and

plastics, though construction-related and computer manufacturers cited declines in new orders as well. In contrast, demand for fabricated metals and machinery rose,

and chemical and refinery utilization rates increased.

Overall, outlooks weakened, with just under two-thirds of

contacts noting waning demand and/or recession as a

key concern. Other headwinds cited were elevated input

costs, labor shortages, and higher labor costs.

Wage pressures remained elevated, though they have

stabilized or moderated in some industries. A food manufacturer noted having issues finding workers despite

offering a starting salary that was more than twice the

minimum wage, while construction contacts noted some

easing in pricing for certain trades.

Prices

While input costs continued to rise, the pace of increases

moderated in energy, construction, and manufacturing.

Freight costs dipped. Some manufacturers noted continued price pressures from supply chain constraints, and a

few firms said higher borrowing costs were slowing down

expansion plans. Selling price pressures decelerated

Retail Sales

Overall retail sales held steady in March. Auto sales rose

strongly, though one contact noted a pullback in demand

due to high interest rates. Clothing and health and per-

K-1

Federal Reserve Bank of Dallas

sonal care retailers cited higher sales. In contrast, electronics and appliance store sales dipped, which some

contacts attributed to slow activity in the housing market.

Nonstore retailers reported sluggish activity in part due

to more people traveling this spring break.

increases in loan pricing were noted. Banking outlooks

continued to deteriorate, with contacts expecting a contraction in loan demand and business activity and an

increase in nonperforming loans over the next six

months. Increased uncertainty and lack of confidence

resulting from the recent banking issues were cited as

concerns.

Nonfinancial Services

Modest expansion continued in the service sector. Revenue growth was the strongest in leisure and hospitality,

and activity in professional and business services, education, and transportation services rose as well. Small

parcel and air cargo shipments were flat to down, while

sea cargo volumes remained robust and were up notably

compared with year-ago levels. One contact noted that

the recent train derailments had increased supply chain

delays. Airlines saw continuing solid demand for leisure

travel and some contacts expect business travel revenues to reach pre-pandemic levels this spring. Demand

for staffing services was mixed, with firms making whitecollar placements seeing continued strong activity while

those filling blue-collar positions citing weakness. Health

care and real estate rental and leasing firms noted declining revenues on net.

Energy

Energy activity was essentially flat over the past six

weeks. The rig count was unchanged as activity shifted

between and within basins in part due to lower natural

gas prices. Oil and natural gas production increased in

the first quarter, and expectations are for drilling and

completion activity to rise moderately through the year.

Outlooks worsened, however, partly due to uncertainty

about the economy.

Agriculture

Drought conditions persisted in the western part of the

district while soil conditions were quite favorable elsewhere. The La Niña weather pattern has ended, and

rainfall is expected to increase moving into summer and

fall. Cotton acres are expected to be down significantly

this year, with farmers favoring crops with a relatively

higher price and drought tolerance. On the livestock

side, cattle prices increased dramatically over the past

six weeks and were up from this time last year, and

demand was solid.

Construction and Real Estate

Single-family housing demand improved further during

the reporting period partly due to lower mortgage rates.

However, the level of activity remained well below year

ago levels. Most contacts reported a solid spring market,

with sales, particularly in popular locations at or above

plan. Buyer traffic held up, and contract cancellations

dipped. Housing starts remained subdued. Outlooks

improved but uncertainty remained elevated particularly

considering the recent banking challenges. Apartment

leasing picked up slightly. Rents were flat and occupancy continued to dip as supply outpaced demand.

Community Perspectives

Nonprofits saw increased demand for their services, with

one contact citing higher activity compared with prepandemic levels. Utilization of housing assistance or

temporary shelters increased notably, and some nonprofits said that housing assistance was the fastest

growing need among their clients. Contacts cited growing financial difficulties for low- to moderate-income

families in part due to the recent reduction in SNAP

benefits. One nonprofit noted that more middle-class

families were seeking financial help as their wages had

not kept pace with rising living costs. High or rising operating costs remained a challenge for many nonprofits,

and some were concerned that with many companies

downsizing, they would not meet their fundraising

goals.■

Demand for office space was lackluster, and heightened

levels of sublease space remained an impediment to

market recovery. Activity in the industrial market stayed

solid, but vacancy edged up due to the arrival of new

properties. The higher cost of capital, tighter lending

standards, and financial uncertainty has made it challenging to price deals, diminishing investment sales

activity. Some contacts voiced concern regarding the

renewal of commercial real estate loans, particularly

those secured by office properties.

Financial Services

Loan demand continued to decline in March as bankers

reported worsening business activity. Loan volumes fell,

driven largely by a sharp contraction in consumer loans.

Loan performance worsened slightly overall. Credit

standards and terms tightened sharply, and marked

For more information about District economic conditions visit:

www.dallasfed.org/research/texas

K-2

Federal Reserve Bank of

San Francisco

The Beige Book ■ April 2023

Summary of Economic Activity

Economic activity in the Twelfth District grew slightly during the mid-February through March reporting period. Employment levels were stable, while labor market conditions remained tight overall. Elevated wage and price levels persisted

though grew at a slower pace relative to the last reporting period. Sales of retail goods softened slightly, while activity in

the consumer and business services sectors maintained strength. Demand for manufactured products was steady, while

conditions in the agriculture and resource-related sectors continued to slow slightly. Residential and commercial real

estate markets weakened. Lending activity decreased substantially. Communities across the Twelfth District faced

heightened challenges in their ability to provide food, shelter, and services due to credit constraints and reduced philanthropic giving. Looking ahead, contacts had a weaker overall economic outlook and expressed uncertainty in their business planning amid current market conditions.

Labor Markets

consumer services, legal services, and agriculture. One

contact in California noted that produce prices rose

following supply disruptions due to recent flooding in the

state. Firms largely continued to experience rising input

costs, such as transportation, food, some construction

materials, and insurance, though the pace of these increases moderated. Changes in energy prices were

reportedly mixed, and a few contacts observed some

softening in steel and aluminum prices.

Labor market conditions remained tight overall despite

reported softening in some sectors such as financial

services and technology. Employment levels remained

mainly stable, although hiring challenges continued in

most sectors due to skill mismatch and limited labor

supply. Contacts reported difficulty finding workers

across all skill and experience levels. There were some

signs however of easing, which several contacts attributed to an increase in labor supply from recently laid-off

workers seeking employment. Several contacts noted

improved worker retention in recent months, although job

turnover remained generally elevated. While employers

in leisure and hospitality continued to hire, which alleviated ongoing staff shortages, businesses in the financial

services, technology, and entertainment sectors reduced

head counts in response to waning demand.

Community Conditions

Conditions in the community support and services sector

worsened in recent weeks. Nonprofit organizations reported that heightened uncertainty in the banking sector

limited their access to credit and delayed ongoing affordable housing and community support projects. Nonprofit

organizations noted that recent banking developments

led many corporations to cut back on charitable donations, which further constrained their ability to meet

demand for basic needs, including shelter, rental and

food assistance, and mental health services. Employers

across the District reported increased burnout and mental health strain among workers, particularly low-wage

earners, due to higher living costs.

Wage growth moderated during the reporting period, but

wage levels remained high. Although wage pressures

eased somewhat, workers continued to demand higher

pay, and employers maintained offers of higher wages to

attract and retain workers in the face of consumer price

inflation and high housing costs. Contacts noted that with

stiff competition for labor, firms attracted talent with pay

increases and better benefits.

Retail Trade and Services

Retail goods sales softened slightly, as reduced savings

and rising household debt hampered consumption expenditures. Food spending decreased somewhat as

households continued to trade down to lower cost items.

One contact from Washington noted that sales of organic

produce weakened relative to conventional products.

Prices

Overall price levels rose during the reporting period,

though at a somewhat slower pace. Reports indicated

higher final prices for goods and services in several

sectors, including manufacturing, leisure and hospitality,

L-1

Federal Reserve Bank of San Francisco

However, home improvement and do-it-yourself projects

continued to support strong sales at home centers.

output in the Pacific Northwest remained stable. Sales of

harvested timber cooled further, while investor demand

for timberland remained elevated.

Conditions in the consumer and business services sectors remained strong. Demand for health-care services

continued an upward trend. Demand for air travel was

strong, while that for leisure and hospitality moderated

somewhat in parts of the District, including Southern

California, due to consumers’ concerns about economic

uncertainty. At the same time, the tourism industry in

Hawaii and Nevada remained strong. Record rain and

snowfall across the West Coast had a mixed effect.

While the hospitality sector in Southern California saw a

significant slowdown, Northern California saw higher

demand for outdoor recreation.

Real Estate and Construction

Conditions in the residential real estate sector worsened

over the reporting period. Demand for single-family

homes softened, and homes stayed on the market longer. Selling prices fell below initial asking prices, and the

cancellation rate for purchase agreements reportedly

increased. Multifamily housing demand was stable to

weaker, depending on the region, and asking rents or

the rate of rent increases fell. Uncertainty and high financing costs dampened new construction, but some

reports indicated stronger activity in the lower-cost home

category. Ongoing projects continued to be developed

as planned across the District, but builders highlighted

shortages of electrical equipment as a constraint to

construction activity in the region.

Manufacturing

Activity in the manufacturing sector was steady. Some

reported softness in orders from the construction industry was offset by strength in metal production, engineering, and food manufacturing. Demand for capital equipment and metal recycling products increased in recent

months, while demand for wood products weakened as

rising mortgage rates and bad weather slowed down

residential construction. Production costs remained

above historical averages, and labor tightness persisted.

While supply disruptions continued to improve, contacts

across the District reported delays in getting various

electrical components.

Activity in the commercial real estate market weakened.

Demand for office and health-care space continued to

wane. Office vacancies rose as leases expired and

occupants reduced their need for space due to hybrid

and remote work arrangements. Demand for warehouse

and industrial space remained generally strong, as did

the demand for new data centers. One contact in Oregon

highlighted local government’s ongoing plans for continued development in downtown areas.

Agriculture and Resource-Related Industries

Financial Institutions

Activity in agriculture and resource-related sectors decelerated slightly. Exports of agricultural goods weakened,

and domestic demand for agricultural products was

mixed. While growers in the Pacific Northwest reported

weaker sales overall, producers in California noted

strong, stable demand for fresh produce and other agricultural goods. Persistent rains and flood conditions in

California affected plant pollination, delayed the planting

of crops like tomatoes and cotton, and cast doubt on the

viability of some orchard crops. One contact in Central

California reported that the recent rains made large

portions of grazing lands unsuitable for cattle. Seafood

Lending activity fell significantly in recent weeks amid

higher interest rates and elevated uncertainty in the

banking sector. Lending standards tightened notably,

and several depository institutions opted to reduce loan

volumes, especially for new clients, despite reporting

ample liquidity. Reports indicated that existing and

planned projects across sectors were delayed or cancelled due to higher funding costs, heightened uncertainty, and more limited access to credit. Following recent

volatility in deposit levels at regional and community

banks, outflows have reportedly stabilized since late

March.■

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